Sectoral SnippetsIndia Industry Information

Issue 9 - April 2007

KPMG IN INDIA

Page 2 of 15

Sectoral Snippets

About Sectoral Snippets

Sectoral Snippets is an India-focused, monthly, freely-distributable newsletter brought out by

KPMG in India. This newsletter provides an overview of the Indian economy in the form of

news-briefs from across key sectors.

Contact mknowledge@in.kpmg.com if you are interested in receiving this newsletter on a

regular basis, or wish to unsubscribe.

Table of Contents

1. Indian Economy 3

2. Auto and Auto Components 4

3. Banking and Insurance 5

4. Consumer Markets and Retail 6

5. IT / ITeS 7

6. Media 8

7. Oil and Gas 9

8. Pharma 10

9. Power 11

10.Real Estate and SEZs 12

11.Telecom 13

12.Transport and Logistics 14

Sectoral Snippets, Issue 9

Indian entrepreneurs today are much more

confident today with most business confidence

indices being at their highs, as well as

amongst the highest in the world. This

increased confidence is also reflected in the

ever more aggressive acquisition-led global

strategies being followed by Indian companies.

The Indian stock markets have rewarded these

companies with ever higher valuations and

market capitalization.

This explains how 14 Indians were identified

as new billionaires by Forbes magazine, and

three of them have made it to the list of top 20

in the world! Six years ago, India had only four

billionaires. A paradigm shift is taking place in

the way Indians interact with the world and

vice versa.

Most of these new billionaires come from

some of India’s most promising sectors, such

as Information Technology (IT) and real estate.

In this issue, we present you the latest

development in these sectors.

We hope you find this issue of Snippets

interesting and look forward to receiving your

feedback.

Regards,

Russell

Russell Parera

Chief Executive Officer

KPMG in India

©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

India,�at�present,�has�36�billionaires�with�a�total�net�worth�of�USD�191�billion;

while�China�and�Hong�Kong�have�41�with�a�total�net�worth�of�USD�140�billion,

according�to�Forbes�magazine.�These�countries�have�replaced�Japan,�which�for

the�past�20�years�has�had�the�highest�number�of�billionaires�in�the�continent.

Forbes�has�credited�the�growth�in�number�of�billionaires�in�India�to�the�boom�in

commodities�and�the�spread�of�technology.�

India�is�growing�to�be�at�par�with�other�developed�Asian�countries�in�other

respects,�too.�As�countries�across�Asia�are�struggling�to�retain�employees�and

compensation�is�becoming�an�increasingly�important�factor,�India�for�the�fourth

consecutive�year�has�posted�a�two-digit�increase�in�overall�salary�growth.�This

growth�is�the�highest�in�the�Asia�Pacific�region.In�2007,�Indian�salaries�are

expected�to�rise�to�an�average�of�14.5�percent;�followed�by�the�Philippines�with

an�increase�to�8.9�percent�and�China�to�8.2�percent.�(Source: Hewitt Associates’

Hewitt Salary Increase Survey)

As�India�is�moving�along�a�higher�growth�path,�its�trademark�advantages�of�low

cost�and�cheap�labour�are�slowly�vanishing.�Industry�trends�show�that�foreign

companies�are�no�longer�attracted�to�the�country�for�its�cost�advantage.

Recently,�several�foreign�companies�that�have�been�offshoring�their�processes�to

India�have�hived�off�their�sourcing�units�through�a�gradual�exit�process.�According

to�Forrester�Research�(an�independent�technology�and�market�research�

company),�as�companies’�offshore�units�grow�in�size,�management�of�human

resources�becomes�time�consuming,�and�are�therefore�considered�an�avoidable

cost.�Companies�like�GE�and�British�Airways,�for�instance,�sold�their�captive�units

some�years�ago.�Likewise,�today�around�24�other�companies�are�reported�to�be

considering�this�option.�

India and the rest of the world

•�By�2010,�bilateral�trade�between�India�and�Russia�is�estimated�to�reach�USD

10�billion,�from�the�current�USD�6�billion

•�Canada�is�keen�to�enter�into�a�foreign�investor�protection�agreement�with

India�by�the�end�of�2007.�Canada�is�eager�to�improve�trade�with�India,�which

was�USD�3.6�billion�in�2006,�by�overcoming�the�disputes�over�farm�subsidies

that�have�stalled�the�Doha�round�of�talks

•�The�Indo-American�Chamber�of�Commerce�suggests�that�since�the�US�is

India's�most�prominent�trade�partner�(trade�between�the�two�countries�grew

by�19�percent�to�touch�USD�32�billion�in�2006),�the�two�should�explore�

advantages�and�feasibility�of�a�free�trade�agreement

•�With�the�aim�of�building�a�high-quality�economic�partnership,�India�and�Japan

are�discussing�a�comprehensive�Economic�Partnership�Agreement�(EPA)�and

is�likely�to�be�signed�by�the�end�of�2007

•�Early�March�2007�saw�the�signing�of�a�Bilateral�Investment�Promotion�and

Protection�Agreement�(BIPPA)�between�India�and�Trinidad�&�Tobago.�The�aim

of�this�agreement�is�to�enhance�investment�and�technology�flows�between

the�two�countries

Indian EconomyPage 3 of 15

Analyst: Anjali Pai©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“Indian paychecks are expected toeventually reach the same levelsas developed Asian economieslike Japan and Singapore” According to an annual survey by HR consulting firmHewitt Associates which looked at 1,500 Asian companies including 580 Indian ones. (Source: news.goldseek.com, March 27, 2007)

• BMW rolls out its first locally assembled sedans in India

German car manufacturer BMW inaugurated its first manufacturing plant in

Chennai, India to assemble BMW 3 and 5-Series sedans. The price of the

3-Series will be around USD 60,681 - 72,727 (INR 2.6 – 3.2 million) and the 5

Series will be between USD 84,090 - 95,454 (INR 3.7 -4.2 million). The plant

has an overall production capacity of 1,700 units. BMW has invested USD 25

million in setting up its Indian operations and expects to breakeven in the

second year of its operations. The company aims to sell 1,200 cars in India this

financial year and open 12 dealerships by 2009. It has also tied up with ICICI

Bank for auto finance and Bajaj Alliance for auto insurance.

• Government allocates USD 44.9 million for testing centres

The government has allocated USD 44.9 million for building hi-tech automotive

testing and validation centres across seven cities in the country. At present,

Indore has been selected as one of the sites. The new testing and validation

centres will test and certify wide range of vehicles, including cars, trucks and

multi-axle vehicles on a variety of tracks before entering the market.

• Honda to enter 100 cc entry-level motorcycles in India

Honda Motorcycles and Scooters India (HMSI), a wholly-owned subsidiary of

Japan’s Honda Motor Company, plans to enter the 100 cc motorcycle segment

to reach out to the masses. HMSI enjoys around 8.5 percent market share in

the domestic two-wheeler market. At present, HMSI manufactures 125- cc bike

Shine and 150-cc Unicorn and a range of scooters like Eterno, Dio and Activa.

• Toyota plans to expand its output

Toyota plans to expand its plant capacity in Bangalore from an annual output of

50,000 vehicles to about 200,000 units by 2010-11. The company has invested

invest USD 500 million and aims to garner 10 percent share of the country's car

market by 2010. It also plans to roll out small–size vehicles for INR 300,000

(USD 7,000), which is half the price of its existing cars viz., Corolla and Innova.

Toyota’s manufacturing plant is a joint venture with Kirloskar, an Indian

engineering group.

• Bentley to launch coupes for INR 40 million in India

Bentley, the European car maker, plans to launch its latest 'Brooklands' coupe

in India for an approximate price of USD 900,000 (INR 40 million). The

Brooklands is the sports version of the luxury marque powered by a 6.75 litre

twin-turbocharged V8 engine. The company has allocated two Brooklands for

India and only 550 units of Brooklands are expected to be manufactured

globally in the next three to four years. At present, Bentley sells its Arnage and

the Continental series in India and all the vehicles are priced over INR 30 mil-

lion.

Page 4 of 15

Auto and Auto Components

Analyst: Ranjeet Javeri©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“The Indian automobile marketoffers big opportunities forgrowth. Opening this plant underpins our long-term route toprofitable growth” Dr Norbert Reithofer, Chief Executive, BMW(Global Insight Limited, March 30, 2007)

• RBI increases Repo and CRR rates

In a series of measures to contain inflation and liquidity in the system, the

Reserve Bank of India (RBI) has hiked the Repo rate (the rate at which RBI

lends to banks) by 0.25 percentage points to 7.75 percent, with immediate

effect. In addition to this, the Cash Reserve Ratio (CRR) (the mandatory

deposits by banks with RBI) has been raised by 50 basis points to 6.50 percent

in two phases effective from April 14 and April 28, 2007, respectively. The

interest rate applicable on eligible CRR balances stands reduced to 0.5 percent

per annum from the current 1 percent rate per annum, with effect from the

fortnight beginning April 14, 2007. This squeezes the interest earned by the

banks on parking money with RBI. Since September 2004, the repo rates have

been raised by 1.50 percent and CRR by 1 percent. The last three hikes in repo

rate of 0.25 percent (each) were initiated in the last four months.

• Robeco Groep to acquire 49 percent stake in Canbank

Netherlands-based Robeco Groep NV (part of Rabobank Groep) plans to

acquire 49 percent stake in Canara Bank’s asset management business,

Canbank Investment Management Services (Canbank) for INR 115 crore (USD

26 million). Canbank is a relatively smaller player with Assets Under

Management (AUM) of about USD 500 million. As of February 2007, India has

32 mutual fund players with total AUMs of around USD 80 billion.

• Life Insurance business growth continues

The life insurance business in India continues to grow with the first year

premium written increased to USD 13.2 billion (125 percent y-o-y growth) for

the nine months ending February 2007. The government-owned, Life Insurance

Corporation, continues to be the key driver of growth for the life insurance

industry. It has risen at 131 percent for the same period, while maintaining its

market share of 75 percent. There are fifteen other private players operating in

the life insurance space in India.

UK-based bank HSBC has announced a joint venture in life insurance business

with Canara Bank and Oriental Bank of Commerce. According to market

reports, life insurance business in India has enough potential for growth, as

presently about 2.5 percent of India’s 1.1 billion population is insured.

• Foreign Investments in Indian Stock Exchanges

Germany-based Deutsche Boerse and Singapore Exchange each have

acquired a 5 percent stake in the Bombay Stock Exchange. The total amount

invested is estimated at INR 189 crore each (USD 43 million) for the equity

buyout.

Further, the US-based securities firm, Morgan Stanley, Citigroup Inc and

private-equity investor, Actis have bought a total of 6 percent stake in the

National Stock Exchange (NSE) for an undisclosed amount. Earlier, in January

2007, several foreign investors including New York Stock Exchange together

picked a 20 percent stake in the National Stock Exchange for an estimated

USD 460-480 million, valuing the National Stock Exchange close to USD

2.3-2.4 billion. RBI allows 49 percent Foreign Direct Investment (FDI) in stock

exchanges, with a separate FDI cap of 26 percent and Foreign Institutional

Investor (FII) cap of 23 percent. Further, the Securities and Exchange Board of

India (SEBI) has stipulated a 5 percent investment limit for single investor

(foreign or domestic).

Page 5 of 15

Banking and Insurance

Analyst: Aman Kaushik©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

Source: RBI DataNote: Exchange rate taken as 1 USD = 44 INR

Repo Rate (April 04 - April 07)

• Hershey to foray in India

U.S.-based chocolate and confectionery maker, Hershey has entered into an

agreement with Godrej Beverages & Food to form a joint venture to

manufacture and distribute confectionery products, snacks and beverages

across India. Hershey is likely to invest USD 60 million and have a 51 percent

stake in the venture, which would be called Godrej Hershey Foods &

Beverages Ltd. The new venture would focus on combining Hershey's brands

and product innovation capabilities with Godrej's manufacturing and distribution

network across India. As part of the venture, both companies would develop

and build Hershey brands across India. The initial portfolio would include

Godrej confectionery and beverage products and Hershey's Syrup brand. This

portfolio will progressively include other Hershey items.

• RPG group plans to expand its retail business

The RPG Group plans to invest about USD 270 million towards expanding its

number of retail outlets, Spencer’s, to 2,000 from the present number of 125 in

the next two years. Spencer's retail stores would be spread across five formats,

viz., Spencer's Hyper, Spencer's Super, Spencer's Daily, Spencer's Express and

Spencer's Fresh. These outlets would collectively have retail space close to 1

million sq ft by 2009 and provide employment to about 100,000 people. Apart

from tier I cities, the Group also plans to target tier II cities for expansion.

• Walt Disney plans to open 300 Disney stores in India

Walt Disney has entered the Indian market through a tie-up with the franchising

group, Devyani International and has launched its first merchandise store at

Gurgaon. The stores would sell branded products for children in the 3-10 years

age group. Disney plans to open 300 stores within three years, of which the

first 22 stores would be operational by the end of this year. Disney plans to

have a presence in metros and tier II cities. The total investment for this foray is

expected to be around USD 34 million.

• Italian coffee giant to acquire Barista, Fresh & Honest Café

Italian espresso coffee producer, Lavazza plans to acquire the Indian coffee

shop chain Barista and vending coffee machines distributor Fresh & Honest

Café from Sterling Infotech Group for USD 131 million. As a part of Lavazza’s

expansion plans, Barista outlets would be increased to 400 from the existing

156 in three years. It also plans to expand the presence of Fresh & Honest

Café in the automatic coffee vending and retail coffee powder segments.

Lavazza is currently operating in 80 countries and these acquisitions are a part

of its international expansion plans.

• Titan to capture the prescription eyewear segment

Titan Industries plan to foray into the prescription eyewear segment in India

under the brand name “Titan Eye +”. It plans to open 150 stores in the next 3-4

years and sell frames, lenses, contact lenses and sunglasses. According to

Titan, the total eyewear market in India is estimated at USD 400 million, of

which the organized segment is about 10 percent. Titan plans to capture 20

percent of the market share in the next 3-5 years. Titan Eye + stores would be

positioned in the mid-price segment and class A & class B cities.

Page 6 of 15

Consumer Markets and Retail

Analyst: Sitanshu Sheth©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“India is an important growth market with tremendous long-termpotential for our company….” Richard H. Lenny, Chairman, President and CEO, TheHershey Company(Source: Company website)

• IBM inks deal with Idea

International Business Machines (IBM) has bagged a 10-year contract worth

USD 600-800 million from Idea Cellular to integrate and transform its business

processes and IT infrastructure. The deal would help Idea meet the needs of its

14 million customers and support the future growth by transforming critical

business processes including billing, fraud management, e-billing and payment

and customer care. The contract, which starts from April 1, is designed on an

innovative risk-reward revenue-sharing model and covers Idea's existing

operations and potential new additions. For IBM, this is its second win in the

Indian Telecom segment. Bharti Airtel, in March 2004, awarded a 10-year, USD

750 million contract to IBM for equipment and network management services.

• Moser Baer to set up fabrication plant for USD 250 million

Moser Baer, India’s premier manufacturer of removable data storage media,

plans to set up a thin film solar fabrication plant with technological partnership

firm, Applied Materials Inc, US. The estimated investment outlay is USD 250

million, over the next three years. The plant will be commercially operational

from March 2008. Initially, the company will have a manufacturing capacity of

40 MW, which would be increased to 200 MW by 2009.

• Satyam bags a USD-200 million deal from Applied Materials

Satyam has entered into a USD 200 million, five year deal with the US-based

electronic industry player, Applied Material Inc. According to the contract,

Satyam will provide application development, maintenance and support and

business transformation core technology services to Applied Materials, through

a managed services delivery model.

• TCS signs a deal with GSK

Pharma major GlaxoSmithKline (GSK) Plc and TCS have entered into a

multi-year, multi-million dollar agreement to establish a global drug development

support centre in Mumbai. TCS will provide services in clinical research;

including clinical data management and clinical submissions support to GSK.

• EDS buys RelQ

Texas-based IT Major, Electronic Data Systems,(EDS) has entered into

definitive agreement to acquire Bangalore-based, RelQ Software Private

Limited for an undisclosed amount. RelQ provides full range of validation and

verification service offerings to clients in banking and financial services,

consumer electronics and telecom industries and employs close to 700 people

in India, UK, US and France. EDS believes that the acquisition will accelerate

EDS’s existing global software testing, validation and verification services for

enterprise clients.

• WNS acquires Marketics

WNS, India’s second largest third party BPO, has signed a non-binding letter of

intent to acquire Marketics, the Bangalore-based KPO for USD 65 million.

Marketics provides marketing analytics services and employs about 200 people

in Bangalore and Coimbatore.

Page 7 of 15

Analyst: Devesh Bhatt

IT / ITeS

©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“Emerging markets have a majorrole to play... India is at the centrestage for growth” Michael Dell, CEO, Dell Inc.(Source: Mumbai Mirror, March 21, 2007)

• ‘India TV’ gets USD 11.5 million foreign investment for Hindi news

channel

India TV, has attracted a foreign direct investment of USD 11.5 million from

FUSE+Media, an affiliate of international venture fund Comventures. The

investment gives FUSE+Media a 19.17 percent stake in Independent News

Services Pvt. Ltd, India TV’s parent company. The group is planning to launch

Gujarati and Punjabi news channels by the end of 2007. The investment in

India TV has been made through the Mauritius-based CV Global Holdings.

• Daily Mail partners with India Today

Associated Newspaper, the newspaper division of Daily Mail & General Trust

PLC, has entered into a partnership deal with the India Today Group (ITG) to

launch a morning daily, multi-city newspaper. This will be ITG’s first foray into

mainline newspapers. The Daily Mail General Trust is one of the largest and

most successful media companies in the UK. The circulation of its national

newspapers is around 2 million copies on weekdays and 3 million copies on

Saturdays. The India Today Group’s print titles include leading news and

business magazines.

• Independent News and Media PLC acquires stake in Radio Mantra

Independent News & Media PLC (INM) has picked up a 20 percent stake in

Radio Mantra, FM venture of the Jagran Group. INM has 128 radio stations in

Australia. This is the company’s second partnership with the Jagran Group, the

first being with Jagran Prakashan. Though the alliance focuses on financial

investment, Radio Mantra will also share technological know-how with INM.

Radio Mantra launched its first station in Hissar, Haryana in March 2007. The

Jagran Group has acquired licenses to operate radio stations in seven more

cities to reach out to untapped Hindi speaking markets.

• Moser Baer ventures into home video business

Moser Baer has entered into home video business with the national launch of

101 Hindi Titles priced at INR 28 for VCDs and INR 34 for DVDs. At present,

Moser Baer has titles in all major Indian languages and non–film titles and soon

plans to launch titles in English and other regional Indian languages. Apart from

online purchase, the company already has 450 distributors across India.

• India Media to list on AIM

India Media Plc plans to list its funds on the London’s Alternative Investment

Market (AIM) and raise USD 150 million. The net proceeds will be invested over

a period of 12-18 months in a portfolio of high growth companies in the Indian

media and entertainment sectors including broadcasting channels, content

providers, multiplexes, and so on. It will provide access to international

investors to India’s fast-growing media market. The fund is chaired by Roger

Parry, chairman of Johnstone Press and YouGov Plc.

Page 8 of 15

Media

Analyst: Ashwini Kulkarni©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“The entertainment industry isgrowing at a healthy pace of 20percent per annum” Deepak Puri, Chairman and MD Moser Baer India(Source: exchange4mediaNews Services, ‘Moser Baer foraysinto home entertainment with video titles’ dated March 30,2007)

• Eighty-five exploration rights on offer in the seventh round of

NELP

Under the seventh New Exploration Licensing Policy (NELP) announced in April

2007, 85 oil and gas exploration rights will be auctioned. Around 34 overseas

oil companies bid in the previous six rounds of NELP. These companies were

offered fiscal benefits such as full cost recovery and tax breaks coupled with

legal certainty by NELP.

• ONGC and Petrobras together bid for blocks in Australia and India

Oil and Natural Gas Corporation Ltd. (ONGC) and Petrobras (Brazil), plan a

joint bid for oil and gas blocks in Australia. They are also considering to bid

together for blocks in India, which will be on offer in the next auction of

exploratory rights to be held by the Indian Government.

• Cairns to finalize India Oil Pipeline project

Cairn Energy plans to build an oil pipeline to source crude from Rajasthan to

the Gujarat coast in India. The estimated outlay is around USD 700 million, of

which Cairn is expected to bear 70 percent and the rest by ONGC.

• Australia’s Eden Energy signs an agreement in India

Eden Energy Ltd has signed a second agreement in India for its Hythane fuel

technology. The new agreement is signed with Gujarat State Petroleum Corp

Ltd (GSPC), which covers a period of five years to market the mixture of

hydrogen and natural gas. Earlier in December 2006, Eden signed a 10-year

agreement with the Chennai-based large bus and heavy transport group, Ashok

Leyland.

• CNPC plans pipeline projects in India and Libya

China National Petroleum Corp. (CNPC), China's biggest state-owned oil

company, is expanding its market through projects to build oil and gas pipelines

in Libya and India. CNPC has already started construction of the 1,000-mile

gas pipeline in India in January and has signed a contract for a 4.8-mile crude

oil pipeline in Libya. Chinese companies are extensively looking at expanding

their foreign presence for the country’s booming economy.

• India keen to participate in oil and gas blocks in Bahrain

Bahrain is now offering new oil and exploration blocks. The Ministry of External

Affairs in India has shown keen interest to participate in the oil exploration

blocks in Bahrain. India wants to participate in the upgradation and

enhancement of projects in downstream industries. Bahrain provides

tremendous opportunities in the areas of oil and gas production, as India's

rapidly expanding economy heavily relies on imported oil and gas.

Page 9 of 15

Oil and Gas

Analyst: Amiya Swarup©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“In order to enhance the energysecurity of the country and tosafeguard against short-term supply disruptions, the government has approved settingup of 5 million tons strategic storage of crude oil” Minister of State for Petroleum and Natural GasDinsha Patel(Source: The Press Trust of India, March 13, 2007)

• PPD enters into licensing agreement with Ranbaxy

PPD, a US-based global contract research organization, has entered into an

agreement to develop, manufacture and market Ranbaxy Laboratories’ novel

statin for the treatment of dyslipidemia. PPD will conduct additional preclinical

studies and file an investigational new drug application with the US Food and

Drug Administration. As per the agreement, the development and

commercialization costs will be incurred by PPD. Ranbaxy will receive

milestone payments and royalties on sales and will also retain the co-marketing

rights in India.

• Glenmark strikes a deal with Medicamenta and Dyax

Glenmark Pharmaceuticals, an Indian pharma company, has acquired a majori-

ty stake in Czech firm Medicamenta, through its wholly-owned Swiss

subsidiary Glenmark Holdings SA, for an undisclosed amount. The acquisition

will give Glenmark an entry in the Czech Republic and Slovakia markets, where

Glenmark plans to develop and expand Medicamenta’s current portfolio.

Glemark has also entered into a collaborative research agreement with Dyax, a

US-based biopharmaceutical company, for the development of therapeutic

antibodies proteins. Dyax will conduct research on three lead molecules. It will

receive technology license fees, employee fees as well as milestone

payments from Glenmark. Dyax is further expected to receive royalties on

sales, upon successful launch of the product. This deal marks Glenmark’s entry

in the field of novel biologics research.

• Syngene in a research partnership with Bristol-Myers Squibb

Syngene, a subsidiary of Biocon, which provides customized R&D services to

pharma and biotech companies has signed a research partnership with

Bristol-Myers Squibb. According to the agreement, a dedicated research facility

employing over 400 scientists will be set up in Biocon’s Bangalore park to

provide services in the area of drug discovery and early drug development.

• GVK Biosciences enter into a joint venture with INC Research

GVK Biosciences, an Indian company focused on contract research services,

has entered in a 50:50 joint venture with global contract research organization,

INC Research, to set up INC GVK BIO Pvt Ltd in India. The new entity will

provide PhaseI-IV clinical trial services for INC’s global clients in the oncology,

central nervous system, infectious diseases and pediatrics segments. This

tie-up will give GVK Biosciences an access to INC’s global customer base,

while INC will leverage on GVK’s low-cost research facilities.

• Zydus Cadila acquires Mumbai-based Liva Healthcare

Zydus Cadila, Indian pharma company, has acquired a 97.5 percent stake in

Mumbai-based Liva Healthcare for an undisclosed amount. Liva Healthcare, a

mid-sized privately-owned company, is primarily focused on the dermatology

therapeutic segment. The company also has a presence in the respiratory

therapeutic segment. This acquisition will mark Zydus’ entry in the fast growing

dermatology segment.

Page 10 of 15

Pharma

Analyst: Nandita Kudchadkar©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“This is the first of many stepsthat Glenmark will take on itsjourney to build a significantbranded presence in the importantmarket of Europe andMedicamenta will also provide ageographically central base tosupport Glenmark’s otherEuropean distribution activities” Guy Clark, President of Glenmark Europe(Source: Company website, Press Release, March 26, 2007)

• Tata Power to acquire stake in two Indonesian coal firms

Tata Power has signed definitive agreements to purchase 30 percent equity

stakes in PT Kaltim Prima Coal (KPC), PT Arutmin Indonesia (Arutmin) and a

related trading company owned by PT Bumi Resources Tbk (Bumi) for USD 1.1

billion. This will give Tata Power access to one of the largest exporting thermal

coal mines in the world. The acquisition would be made through an

offshore Special Purpose Vehicle (SPV). This purchase will support Tata Power

to generate 7,000 MW over the next 5 years on the west coast of India.

• NPCIL plans to add 10,000 MW capacity

State-run Nuclear Power Corporation of India Ltd (NPCIL), which has an

installed capacity of about 3,900 MW, plans to add 10,000 MW of nuclear

power over the next five to ten years. It will entail an investment of around USD

11.4 billion to USD 13.6 billion to increase its generation capacity using

imported uranium, following a nuclear deal with the US. NPCIL has been

looking for sites in the coastal Indian states of West Bengal, Orissa, Andhra

Pradesh and Gujarat to set up new units for additional generation.

• CIL to enter into fuel supply agreement with NTPC

Coal India Ltd (CIL) is set to enter into a first-ever fuel supply agreement (FSA)

with power major, National Thermal Power Corporation (NTPC) with penalty

clauses for non-delivery of coal and failure to lift coal by the utility. The

proposed 20-year pact involves supply of at least 100 million tonnes of coal

annually. NTPC, which needs about 110 million tonnes of coal annually, at

present, buys 100 million tonnes from CIL.

• Tata, BP to invest USD 300 million in solar joint venture

Tata BP Solar India Ltd, a joint venture between India's Tata Power Co and BP

Plc's solar power unit, plans to invest USD 300 million by 2010 in India to boost

its capacity. Tata BP currently has a capacity of 52 MW and the fresh

investment will help it rise to 300 MW. BP Solar, a unit of BP's Alternative

Energy group, makes solar power systems in Spain, Australia, the US, India

and China.

• GAIL may infuse additional funds in Ratnagiri Gas

State-owned gas transmission major GAIL (India) Ltd is willing to infuse

additional funds in Ratnagiri Gas and Power Private Ltd (RGPPL), erstwhile

Dabhol project, only with the condition that the LNG terminal is hived off and

the company is given the right to buy the facility. GAIL holds 28.33 per cent

equity in RGPPL, which has a 2,150-MW power plant and a five million tonnes

per annum LNG terminal and re-gasification facility.

• Toshiba in talks with Larsen & Toubro for power plant business

Japanese giant Toshiba Corporation is said to be in talks with India's Larsen

and Toubro Ltd to enter the coal fired power plant business in the growing

South Asian economy. The proposed venture would jointly produce and sell

equipment for the plants.

Page 11 of 15

Power

Analyst: Amit Chhallani©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“Developing grid connectivity isan essential step for exploitationof energy resources. We wouldsuggest the approach of buildingcountry-to-country grid interconnections as buildingblocks for making feasible flow ofelectricity across the region” Sushilkumar Shinde Power Minister at the SAARCEnergy Ministers' meeting(Source: Asia Pulse, March 8, 2007)

• L&T and Arun Excello to build townships in Chennai

L&T Urban Infrastructure Ltd. (L&T UIL) and Arun Excello, a Chennai based

engineering and construction company, have come together for building an

integrated township project at Vallanchderi in Chennai. The two companies will

form a Special Purpose Vehicle (SPV) to execute the project. The project is

called "Estancia” and will be set up on a 78 acre area with an investment of

around USD 340.9 million, over and above the land cost of USD 68.2 million.

The project would comprise residential zone with 2,000 apartments spread on

37 acre, clubhouse, an IT park with 2.7 million square feet of office space,

school, mall, serviced apartments and a hotel. It is expected to be completed in

three phases by March 2009. The first phase of the project is expected to have

700 residential units.

• DLF, Al Nakheel signs USD 20 billion deal

DLF, the India-based real estate developer, has signed a 50:50 joint venture

worth USD 20 billion with Al Nakheel, a UAE-based real estate company. The

two companies plan to develop two integrated townships near New Delhi and

western Maharashtra. These townships would be developed on 40,000 acres of

land and the construction is expected to begin by the end of 2007. Investment

for these projects is estimated at USD 10 billion initially.

• Shree Precoated Steels to foray in real estate business

Shree Precoated Steels Ltd. (SPSL), the manufacturer and exporter of

Galvanised Coils and Cold Rolled Coils plans to foray in the real estate

business. SPSL is the flagship company of Ajmera Group. The company is said

to be in talks with Anik Development Corporation Pvt. Ltd. (ADCPL) for this

foray. SPSL would offer 4.16 crore of its equity shares with a face value of INR

10/- as a consideration for this amalgamation, and has arrived at a ratio of 5

equity shares of SPSL for every six equity shares of ADCPL. The aim is to

enhance the real estate business of Ajmera Group and also to integrate the real

estate business of ADCPL. The company’s enterprise value post amalgamation

would increase to USD 1212.3 million from the current USD 785.7 million.

• Hinduja group to invest in Dubai real estate

Hinduja Group, India-based conglomerate, is expected to invest USD 272.7

million in the Dubai real estate market. The group is said to have acquired land

in the Waterfront Project of Al Nakheel. It would develop 2 million square feet

property for resort, commercial and mixed use purposes. It has also signed an

agreement with the Dubai-based LLC group, a real estate arm of Dubai Global,

for developing medical services and infrastructure in India and Dubai.

• AIG to enter Indian real estate sector

American International Group (AIG) plans to acquire a 15 percent stake in

RMZ, the Bangalore-based real estate company for a consideration of USD 350

million. The two companies have jointly acquired an 11 acre plot for USD 68.2

million. The company plans to develop 60 million square feet of real estate in

residential and commercial space over the next five years.

Page 12 of 15

Real Estate and SEZs

Analyst: Nitin Dehadraya©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“The real significance is that 650million people in India are under25 years. With the right economicenvironment now in place,demand will be almost insatiable.There has never been a bettertime for overseas investors anddevelopers to engage with theIndian real estate market and anideal opportunity for us to launchCityscape India” Rohan Marwaha, Group Director, Cityscape (world'slargest B2B real estate brand) 4 April 2007(Source: AME Info {press release}, United Arab Emirates)

• TRAI makes STD and ILD calls cheaper

Telecom Regulatory Authority of India (TRAI) has reduced the Access Deficit

Charge (ADC), a levy paid by private operators to state-owned Bharat Sanchar

Nigam Limited (BSNL) for providing services in rural areas, by 37 percent to

USD 454 million for 2007-08 from USD 727 million. TRAI has abolished the

levy of INR 0.80 per minute on all outgoing ISD calls; while for incoming

international calls the charges have been lowered by 38 percent to INR 1 per

minute from INR 1.60. Telecom operators will be charged 0.75 percent of their

adjusted gross revenues towards ADC from existing 1.50 percent.

• BSNL awards broadband deployment contract to UTStarcom

US based telecom and networking solutions firm, UTStarcom, has signed a

contract with BSNL for deploying 1.3 million broadband lines across 900 cities.

The size of the contract is expected to be USD 122 million. With this contract,

UTStarcom becomes the largest broadband equipment supplier in India. The

company is also deploying IPTV services in India for MTNL, another

state-owned telecom company.

• Broadband customer base to touch 20 million by 2010

The government aims to increase the broadband penetration and the expected

broadband customer base is expected to touch 20 million by 2010 from the

current 2.21 million customer base. According to IT and Telecommunications

Minister Dayanidhi Maran, "The Ministry of Communications and IT has set a

target of providing nine million broadband connections by the end of 2007 and

20 million by the end of 2010". With the advent of new technologies such as

Wi-MAX, it is expected that over 1 million broadband connections will be added

every month before the end of 2007.

• Nokia to expand its Indian facility

Finnish handset manufacturer, Nokia plans to expand its Chennai

manufacturing facility to increase exports and meet the domestic market

requirement. It currently operates from a telecom SEZ in Chennai and

manufactures 11 models. Nokia also plans to start component manufacturing by

mid-2007. Nokia exports 30-35 percent of its production to South East Asia,

Middle East Asia and Africa and expects to increase it to 50 percent this year.

The company has lined up investments to the tune of USD 150 million over the

next four years.

• Increasing investments in the telecom retail space

Robust growth in wireless subscribers addition coupled with increasing

penetration of organized retailing in India is luring various players to venture

into the telecom retail segment. Hot Spot, a multi-brand technology retail chain

promoted by the BK Modi Group, plans to expand its presence from 50 outlets

to 1,500 across the country with an investment of USD 100 million. The Essar

Group is also expecting USD 1.1 billion in revenues from its telecom retail

venture, The MobileStore. It plans to increase the number of stores from the

current 60 to 4000. These stores sell a wide range of products including mobile

handsets, accessories and gadgets, recharge vouchers, gaming devices and

value added services. Even, handset manufacturers are foraying into this space

with Nokia, Motorola and Sony Ericsson setting up their exclusive retail outlets

in India.

Page 13 of 15

Telecom

Analyst: Amit Shah©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“The deal with BSNL makes usthe largest broadband equipmentsupplier in India, which is animportant market for UTStarcom.We expect India to be our secondlargest market by early next yearovertaking Japan” David King, Senior Vice-President, International Salesand Marketing, UTStarcom(Source: Hindu Business Line, March 21, 2007

• Railways to develop product-specific corridors

The Indian Railways plan to develop four high-speed product-specific freight

corridors to carry commodities such as steel, iron ore, coal and petroleum

products. The four routes that have been identified are Delhi-Chennai, Goa-

Chennai and Kolkata-Gopalpur (Orissa)-Paradip. The railways also plan to form

a joint working group with industry players in steel, iron ore and coal to study

market trends that would help prepare the final route for the proposed corridors.

The railways also aim at exploring the possibility of linking the new corridors

with the dedicated freight corridors; thereby developing a nationwide network of

dedicated freight routes. It would give the railways a distinction of having the

largest freight network in the world.

• Kotak Private Equity to invest in DRS Logistics

Kotak Mahindra Bank's private equity arm, Kotak Private Equity group, has

invested USD 22.7 million (INR 100 crore) in the Hyderabad-based logistics

provider, DRS Logistics Private Ltd. DRS plans to invest around USD 45.5–56.8

million (INR 200-250 crore) for expanding its warehousing capacity. At present,

the capacity stands at 2.5 lakh sqft across Hyderabad, Chennai, Gurgaon and

Bhiwandi. With an aim to provide complete supply chain management solutions

under one roof, DRS plans to enter courier, shipping, air cargo and railway

services by mid-2008. The DRS group aims to become a USD- 273 million

company by 2010 and a USD-2,273 million company by 2018.

• Mitsui, IL&FS, MMTC join hands for facility in Greater Noida

Japanese firm Mitsui, IL&FS and Mines and Mineral Trading (MMTC) plan to

invest USD 68 million in setting up a logistics facility centre in Greater Noida.

The JV will acquire 1 lakh sq metre of land to construct container yards,

warehouses and car transfer units at the proposed location. Mitsui also plans to

tie-up with Indian container operators and run container business through the

proposed rail yard in the Greater Noida facility. The company is expected to

set-up a truck loading and unloading yard, car transport yard and a

multipurpose warehouse. The facility at Greater Noida would also have a direct

rail connection for which the companies have reportedly initiated talks with the

Indian Railways.

• Kerry Logistics acquires 51 percent stake in RFF

Kerry Logistics Network, part of the Hong Kong based KUOK Group, a

conglomerate with diversified interests in logistics, property, hotels & resorts

among others, has picked up a 51 percent equity stake in the Chennai-based

USD 17 million (INR 75 crore) Reliable Freight Forwarders for an undisclosed

amount. The Indian company has now been renamed as Kerry Reliable

Logistics. As per the agreement, the original promoters of Reliable Freight

Forwarders will hold 49 percent stake in the new company.

• MDLR group floats airline, eyes regional routes

Gurgaon-based realty firm MDLR group is floating an airline company, MDLR

Airlines, which will operate as a regional carrier. The airline will start regional

operations from cities such as Chandigarh, Delhi, Ranchi and Kolkata. It also

plans to enter western India by connecting Surat, Bhavnagar, Mumbai and Goa.

Initially, it will have two BAe AVRO RJ jets and later increase it to five. The

model of MDLR Airlines is similar to Chennai-based Paramount Airways with

business class and first class configuration. MLDR Airlines’ economy fares will

start from USD22.7 (INR 1000) and will have four different buckets for Club

fares (business class). At present, there are only two carriers operating in

regional services, Jagson Airlines and Indus Airways.

Page 14 of 15

Transport and Logistics

Analyst: Preeti Sitaram©�2007�KPMG,�an�Indian�partnership�and�a�member�firm�of�the�KPMG�network�of�independent�member�firmsaffiliated�with�KPMG�International,�a�Swiss�cooperative.�All�rights�reserved.

“The railways have already commissioned a study for theproduct-specific corridors that areexpected to be completed in two-and-a-half years”JP Batra , Railway Board chairman(Source: The Economic Times, March 28, 2007 )

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Reference material for preparing this document is

taken from following sources:

Asia Pulse

Business India

Business Standard

Business Today

Central Statistical Organisation (CSO)

Confederation of Indian Industries (CII)

Dow Jones International News

Factiva

Financial Express

Hindustan Times

India Infoline

Indian Brand Equity Foundation (IBEF)

Indian Business Insight

Infraline

India Today

Mergerstat

NASSCOM

Oil Asia Magazine

Petrobazar

Petromin News

Pharma Biz

Press Trust of India

RBI

Reuters News

The Asian Age

The Economic Times

The Financial Times

The Hindu Business Line

The Namibian

The Statesman

Times of India

Voice & Data Magazine

Xinhua News Agency

Antara News

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Research Inputs by KPMG’s India Research Center